Fosters businessman Danny Ray Butler charged with fraud

Faces multi-count federal fraud indictment

Danny Ray Butler is a Tuscaloosa County businessman who has been involved in several area real estate projects in recent years has been indicted by a federal grand jury on multiple fraud charges and other crimes. Mary Jane Watson, who claims Butler defrauded her of partial ownership of Brown’s Corner, a landmark building at the corner of University Boulevard and Greensboro Avenue, pictured.

Photo | Erin Nelson

By Patrick RupinskiBusiness Editor

Published: Friday, October 4, 2013 at 11:00 p.m.

Last Modified: Friday, October 4, 2013 at 11:25 p.m.

A Tuscaloosa County businessman who has been involved in several area real estate projects in recent years has been indicted by a federal grand jury on multiple fraud charges and other crimes.

Danny Ray Butler, 57, of Fosters was charged in a 51-count indictment that includes charges of making false statements connected to schemes to defraud financial institutions and the U.S. Small Business Administration of more than $3 million, according to a statement issued Friday from Birmingham by U.S. Attorney Joyce White and FBI Special Agent in Charge Richard D. Schwein Jr.

Butler, reached by phone by The Tuscaloosa News, said he had no comment on the charges.

Butler is separately involved in at least three civil lawsuits with people in Tuscaloosa County who accused him of fraud in business dealings with them.

The federal criminal indictment charges Butler with wire fraud and multiple counts of false statements and bank fraud arising from three fraud schemes.

The alleged schemes center around Butler’s ownership of Butler Wholesale Inc., a used car lot on Skyland Boulevard in Tuscaloosa and Fosters Groceries LLC, which he formed to build and operate a supermarket in Fosters.

According to the indictment, Butler defrauded the SBA of $1.76 million in connection with a loan to build Fosters Groceries, engaged in a check-kiting scheme that caused Alabama One Credit Union to lose $1.275 million and made misrepresentations to a company that financed the car inventory at his used car lot, causing that company to lose $50,000.

The indictment outlined the three alleged schemes.

The first started in early 2010 when Butler sought to borrow approximately $5 million from West Alabama Bank and Trust to build the supermarket in Fosters, a community about 12 miles southwest of Tuscaloosa. The bank agreed to loan Butler half the amount for the project, and SBA agreed to finance 35 percent of the project. Butler was to provide the remaining 15 percent.

“Almost immediately after construction was complete, Butler defaulted on the loans by failing to make payments to SBA and West Alabama Bank and Trust as promised. SBA suffered a loss of over $1.7 million,” Vance said in a statement.

According to the indictment, between March 2010 and October 2012, Butler devised a scheme to defraud SBA by submitting false, forged and altered documents including an altered check to get the SBA loan.

“For instance, one count of the indictment alleges that Butler submitted a construction company’s cost proposal for the grocery store project that Butler is charged with altering to increase the proposed cost from $2.3 million to $4.2 million,” Vance said.

The indictment also charges Butler with a check-kiting scheme in 2011 and 2012 by making “carefully timed deposits and checks between his Fosters Groceries account at West Alabama Bank and Trust and his Butler Wholesale account at Alabama One Credit Union to artificially inflate the account balances. Hundreds of checks, totaling about $45 million, were deposited from one account to the other at the two financial institutions, according to the indictment.

“When West Alabama bank discovered the check-kiting scheme in February 2012 and refused to honor a number of Fosters Groceries’ checks deposited into Butler’s Alabama One Credit Union account, the credit union lost about $1.275 million,” Vance said in her statement.

J. Mark White, a Birmingham attorney representing the credit union, said Alabama One officials assisted and cooperated with government authorities in their investigations. He said the credit union also took steps to assure that none of its members will sustain any losses.

The third fraud scheme mentioned in the indictment involves Butler’s misrepresentations to Next Gear Capital to buy used vehicles for his car lot.

Each loan from Next Gear was secured by a specific car, and Next Gear conducted monthly inspections of the dealership’s inventory. According to the indictment, Butler employed various schemes to defraud Next Gear Capital in order to continue receiving loans. His fraudulent representations included representing that cars were part of the dealership’s inventory even though the cars had already been sold, and lying to representatives of Next Gear when they conducted inspections of his inventory.

If convicted, Butler could face up to 20 years imprisonment and a $250,000 fine on each of the three wire fraud counts, up to 30 years imprisonment and a fine of $1 million on each of the 30 bank fraud counts, and up to five years imprisonment and a $250,000 fine on each of the 18 false statement counts, Vance said.

Butler’s legal problems also include three civil suits filed in Tuscaloosa County Circuit Court by people who had business dealings with him.

One of those suits was brought by Tuscaloosa businessman Jerry Griffin and his wife Brenda who said Butler defrauded them in getting loans from them to finance the Fosters supermarket.

A second civil suit was filed by Mary Jane Watson, who claims Butler defrauded her of partial ownership of Brown’s Corner, a landmark building at the corner of University Boulevard and Greensboro Avenue.

And the third suit was brought by Samuel and Tammie Colburn, who say Butler obtained an unauthorized transfer of funds from an account they had at Alabama One Credit Union.

All three civil suits also named Alabama One as a defendant.

Tuscaloosa News reporter Jason Morton contributed to this story.

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